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NORTHAM PLATINUM HOLDINGS LIMITED NORTHAM PLATINUM LIMITED
Incorporated in the Republic of South Africa Incorporated in the Republic of South Africa
Registration number: 2020/905346/06 Registration number: 1977/003282/06
Share code: NPH Debt issuer code: NHMI
ISIN: ZAE000298253 Bond code: NHM015 Bond ISIN: ZAG000164922
("Northam Holdings" or, together with its subsidiaries, Bond code: NHM016 Bond ISIN: ZAG000167750
"Northam" or the "group") Bond code: NHM019 Bond ISIN: ZAG000168105
Bond code: NHM021 Bond ISIN: ZAG000181496
Bond code: NHM022 Bond ISIN: ZAG000190133
Bond code: NHM023 Bond ISIN: ZAG000190968
Bond code: NHM024 Bond ISIN: ZAG000195926
Bond code: NHM025 Bond ISIN: ZAG000195934
Bond code: NHM026 Bond ISIN: ZAG000195942
("Northam Platinum")
TRADING STATEMENT AND TRADING UPDATE FOR THE SIX-MONTHS ENDED 31 DECEMBER 2023
Key metrics:
' 10.6% increase in equivalent refined 4E ounce ("oz") metal from own operations to 434 977 oz 4E (H1 F2023: 393 309 oz 4E),
following a solid performance from all mines across the group, including a 14.9% increase in 4E concentrate produced by Booysendal
and a 51.8% increase in 4E concentrate produced from own operations and surface sources at Eland
' 25.5% decrease in sales revenue to R15.0 billion (H1 F2023: R20.1 billion), despite a 10.4% increase in sales volumes to
457 357 oz 4E (H1 F2023: 414 170 oz 4E), primarily attributable to a 42.3% decrease in the 4E ZAR basket price to R24 269/oz 4E
(H1 F2023: R42 046/oz 4E)
' 6.7% increase in group unit cash cost per equivalent refined 4E oz
' 28.1% cash profit margin per equivalent refined 4E oz
' 73.3% decrease in gross profit to R2.4 billion
' 68.1% decrease in EBITDA to R3.2 billion
' 86.4% ' 96.4% expected decrease in basic earnings per share
' 87.5% ' 97.5% expected decrease in headline earnings per share
' Net debt as at 31 December 2023 improved to R2.4 billion with a rolling 12-month net debt to EBITDA ratio of 0.24, and cash and
cash equivalents of R11.8 billion, with additional available undrawn facilities of R11.0 billion
Introduction
In terms of paragraph 3.4(b) of the JSE Limited Listings Requirements, companies are required to publish a trading statement as soon
as they are satisfied, with a reasonable degree of certainty, that the financial results for the current reporting period will differ by at least
20% from the financial results of the previous corresponding period.
Northam Holdings' financial results for the six-months ended 31 December 2023 ("H1 F2024") are underpinned by a solid production
performance and effective cost control at all operations within the group. Notwithstanding this, Northam Holdings expects to report a
decrease in earnings per share for H1 F2024 compared to the previous six-months ended 31 December 2022 ("H1 F2023"), largely
because of the significant decrease in commodity prices together with a loss of R799.7 million on the disposal of the
Impala Platinum Holdings Limited ("Implats") ordinary shares ("Implats Shares") (JSE share code: IMP) received as part of the disposal
consideration following acceptance of the mandatory offer made by Implats to shareholders of Royal Bafokeng Platinum Limited
("RBPlat"), ("Implats Mandatory Offer").
The table below provides key earnings per share information for H1 F2024, compared to that of H1 F2023:
H1 F2024 H1 F2023 Variance
Basic earnings per share (cents) 56.7 ' 216.3 1 596.2 (96.4% ' 86.4%)
Headline earnings per share (cents) 41.0 ' 201.8 1 608.5 (97.5% ' 87.5%)
Number of shares in issue including treasury shares 396 238 229 396 615 878 (0.1%)
Weighted average number of shares in issue* 390 090 148 390 237 523 (0.0%)
*The weighted average number of shares in issue have been used to determine the basic and headline earnings per share.
Production
The group's equivalent refined metal from own operations increased by 10.6% to 434 977 oz 4E (H1 F2023: 393 309 oz 4E).
Zondereinde's metal production was flat, as expected ahead of the commissioning of 3 shaft, whilst growth from the Booysendal South
mine and Eland was in line with our forecast.
Group production of chrome concentrate increased by 31.8% to 666 692 tonnes (H1 F2023: 505 841 tonnes), on the back of increased
UG2 tonnages and recovery improvements at all operations. This was particularly pleasing, given the recent strengthening of the chrome
price.
The group continued to progress its strategic goals of sustainably growing safe production down the sector cost curve. Challenges remain,
particularly in respect of metal prices, mining inflation and the potential for higher frequency and longer duration Eskom load curtailment
events. Our capital growth programme remains on-track and is improving our operational resilience during the current weak market
conditions.
A key feature has been the solid production performance achieved by all operations. Zondereinde has benefitted from focussed Merensky
stoping in the Western extension, together with logistics decongestion resulting from the ongoing shift in UG2 stoping from the western
to the eastern portions of the mine. Booysendal delivered growth on the back of strong production from North mine, as well as the ongoing
ramp-up of South mine. Eland production is ramping up on schedule with stoping production up by 170%, while mineable reserves have
almost doubled. This has yielded a 51.8% increase in 4E metal production from own operations and surface sources and a 100.0%
increase in chrome concentrate. The successful, on-schedule completion of a new 4.5 metre diameter raise-bored ventilation shaft during
December 2023 has created environmental conditions in the deeper sections of the mine which are critical to the medium-term schedule.
All operations have been subject to numerous Eskom load curtailment events, however, the combination of our comprehensive
load management protocols, as well as increased on-demand self-generation capacity, is limiting consequential production losses. The
group's programme to further increase self-generation capacity is well advanced and will assist in mitigating potential losses resulting
from Eskom load curtailment events. Furthermore, all safety metrics show improvement from the previous financial year, with both
Booysendal and Eland remaining fatality free since inception.
Key production metrics for H1 F2024, compared to H1 F2023, are as follows (in oz 4E):
H1 F2024 H1 F2023 Variance
Equivalent refined metal production from own operations at Zondereinde 160 188 160 806 (0.4%)
Concentrate production from own operations at Booysendal 250 004 217 630 14.9%
Concentrate production from own operations and surface sources at Eland 32 574 21 463 51.8%
Total equivalent refined metal production from own operations 434 977 393 309 10.6%
Equivalent refined metal purchased from third parties 83 107 38 739 114.5%
Total production including purchased material 518 084 432 048 19.9%
Unit cash costs
The increase in group unit cash costs has been limited to 6.7%, despite the ongoing trend of generally higher mining inflation. We have
benefitted from growing mining production, improved concentrator feed grades and disciplined, focussed cost control.
Unit cash costs per 4E ounce for the group, and per operation, for H1 F2024 compared to H1 F2023, are as follows (in R/oz 4E):
H1 F2024 H1 F2023 Variance
Zondereinde cash cost per equivalent refined 4E ounce 24 778 23 479 (5.5%)
Booysendal cash cost per 4E ounce in concentrate produced 17 173 16 169 (6.2%)
Eland cash cost per 4E ounce in concentrate produced* 33 652 30 292 (11.1%)
Group cash cost per equivalent refined 4E ounce 23 562 22 088 (6.7%)
*Eland is in ramp-up phase.
The total cost of purchased concentrates and recycling material increased by 32.0% to R2.1 billion (H1 F2023: R1.6 billion),
with 4E ounce volumes purchased increasing by 114.5%. The cost of purchased material is based on ruling commodity prices as well as
the relevant prill split of the purchased material.
Sales revenue
Sales revenue for the period amounted to R15.0 billion, representing a decrease of 25.5% (H1 F2023: R20.1 billion).
The decrease in sales revenue, despite an increase in 4E sales volumes of 10.4% to 457 357 oz 4E (H1 F2023: 414 170 oz 4E), is
attributable to a significantly lower 4E ZAR basket price of R24 269/oz 4E (H1 F2023: R42 046/oz 4E), representing a decrease of 42.3%.
The lower ZAR basket price is the combined result of a lower 4E US dollar ("USD") basket price of USD 1 302/oz 4E
(H1 F2023: USD 2 422/oz 4E) and an increase in the average ZAR/USD exchange rate achieved i.e. a weaker Rand, being
R18.64/USD (H1 F2023: R17.36/USD).
Total revenue per equivalent refined 4E ounce sold decreased by 32.5% to R32 785/oz 4E (H1 F2023: R48 577/oz 4E). This, combined
with unit cash costs increasing by 6.7% from R22 088/oz 4E in H1 F2023 to R23 562/oz 4E in H1 F2024, led to a decrease in the
cash profit margin per 4E ounce to 28.1% (H1 F2023: 54.5%).
The table below summarises dispatched metal volumes to the group's precious metal refiners, compared to metal volumes refined and
sold together with the average USD sales prices achieved per metal:
Total
equivalent
refined metal
sold
Total refined (including the Average
metal sale of sales prices
Dispatched produced concentrate) achieved
oz oz oz USD/oz
Platinum 276 430 261 876 276 358 918
Palladium 133 327 126 970 133 583 1 180
Rhodium 42 628 42 551 42 512 4 110
Gold 4 910 4 781 4 904 1 937
Total 4E 457 295 436 178 457 357 1 302
Included in total equivalent refined metal sold in the table above is concentrate sold to a third party to honour legacy offtake agreements
relating to the Everest and Maroelabult operations, which contained 24 497 oz 4E in concentrate (H1 F2023: 22 034 oz 4E). Refined
metal sold to the group's customers totalled 433 535 oz 4E (H1 F2023: 392 744 oz 4E), representing an increase of 10.4%.
Financial results
Sales revenue decreased by 25.5% compared to an increase in cost of sales of 13.8%. This resulted in a gross profit of R2.4 billion
(H1 F2023: R9.1 billion), and a gross profit margin of 16.1% (H1 F2023: 45.1%).
We operate a largely fixed cost business and consider increasing production, and doing so efficiently, to be our best defence against
current global inflationary pressures. Our capital allocation and treasury decisions have been guided by our growth strategy and our
results have benefitted from our consistent approach to growing our production base down the industry cost curve.
Earnings before interest, taxation, depreciation and amortisation, and excluding losses on the sale of the Implats Shares, ("EBITDA")
amounted to R3.2 billion (H1 F2023: R10.0 billion).
As at 31 December 2023, inventory on hand amounted to 458 113 oz 4E, valued at R13.7 billion when applying the 4E price and exchange
rate at 31 December 2023.
For the six-months ended 31 December 2023, our operations generated cash to the value of R698.5 million (before capital expenditure),
impacted primarily by working capital movements relating to a build-up of inventory to the value of R909.7 million and the settlement of
trade and other payables amounting to R1.4 billion, mainly relating to the payout of profit share schemes across the group. Capital
expenditure amounting to R2.4 billion was paid in cash during the period.
In light of the prevailing market conditions and negative medium-term outlook, the Implats Mandatory Offer presented a unique and
attractive opportunity during the period for Northam to lock-in substantial value in relation to the RBPlat ordinary shares ("RBPlat Shares")
held by Northam, with a strong cash underpin that was not adversely affected by the steep decline in Platinum Group Metals ("PGM")
equity valuations across the sector. This also presented an opportunity to significantly strengthen our balance sheet and liquidity position,
which in turn provides additional flexibility and optionality.
In accordance with the terms of the Implats Mandatory Offer (details of which are contained in the offer circular issued by Implats dated
17 January 2022), Northam disposed of all of its RBPlat Shares during the period. The offer consideration receivable per RBPlat Share
tendered into the Implats Mandatory Offer amounted to R90.00 in cash and 0.3 new Implats Shares. Northam Holdings received, in
aggregate, R9.0 billion in cash and 30 065 866 Implats Shares.
The Implats Shares were subsequently disposed of on-market for a total consideration of R3.1 billion, representing a volume weighted
average price of R103.95 per Implats Share.
Due to the decrease in the value of Implats Shares from the date of the acceptance of the Implats Mandatory Offer to the date of sale, a
loss of R799.7 million was recognised on the sale of the Implats Shares.
During the period under review, the group paid R2.3 billion in dividends, in respect of the final dividend declared for the financial year
ended 30 June 2023, and settled the NHM020 series in the Domestic Medium-Term Note Programme ("DMTN Programme") to the value
of R682.0 million, which matured during H1 F2024.
Capital expenditure
Capital expenditure amounted to R2.4 billion (H1 F2023: R2.6 billion). This is in line with our trimmed capital schedule, and the combined
result of lower expansionary capital of R1.6 billion (H1 F2023: R1.8 billion), slightly offset by a marginal increase in sustaining capital
expenditure to R846.0 million (H1 F2023: R813.3 million).
The majority of expansionary capital expenditure related to significant activity on the Western extension project at Zondereinde, together
with the ongoing ramp-up at Eland. Sustaining capital expenditure at Booysendal increased in line with production levels, whilst sustaining
capital requirements at our metallurgical operations increased as a result of the upgrade to the furnace slag concentrator at Zondereinde.
We plan significant development activity at the Western extension of Zondereinde, as well as at Eland, over the coming 18 months.
At Zondereinde mine, stoping is ramping-up within the Western extension section and further progress has been made on the deepening
project. Equipping of 3 shaft, for personnel and material transport, as well as the provision of services, is in progress and on track, as is
reaming of 3a ventilation shaft. Both shafts are scheduled to be commissioned towards the end of the financial year ending 30 June 2025
("F2025"). Pilot drilling of the 3b rock hoisting shaft continues, and shaft commissioning is scheduled for the 2028 calendar year. In the
interest of capital preservation during the current PGM market conditions, certain workstreams have been deferred in instances where it
would not have a detrimental impact on the overall project.
Upgrades to the base metal removal plant are progressing well at the group's metallurgical facilities, and the commissioning of the
expanded and upgraded furnace slag concentrator will improve overall metal recoveries, as well as the cash conversion of excess
inventory.
The development of Booysendal South mine is on track. The full complement of stoping crews is in place at the Central UG2 modules
and production has reached steady state levels on a monthly basis. Decline development is continuing in order to increase mineable
reserves and operational flexibility. Progress of the South Merensky module is on target, with current focus on stoping in the upper mining
levels. Stoping is continuing at the BS4 UG2 module and will ramp-up during the coming 12 months. Development of declines at both the
South Merensky and the BS4 modules has been temporarily curtailed and mining crews at South Merensky have been limited in the
interest of capital preservation. Commissioning of the North aerial rope conveyor during the financial year ended 30 June 2022 has
enabled the ramp-up of the North Merensky module to its phase two steady-state production rate.
At Eland mine, processing of ore from surface sources continues, whilst underground feed is being batch treated. Development of the
decline systems has been temporarily paused, in order to focus on strike and raise development and consequently increase mineable
reserves, whilst limiting capital expenditure. We expect to resume decline development in F2025, subject to market conditions at that
time. Underground stoping ramp-up continues on schedule.
A raft of global geopolitical issues has the potential to cause further disruption to PGM markets and metal prices, whilst the potential for
further and more severe Eskom load curtailment events could lead to additional operational disruptions. We continue to monitor the
market and are rolling out additional on-demand self-generation capacity at all of our operations. We will amend our capital programme
when and where prudent, taking into account the changing landscape.
Conclusion
Our revenue is dependent upon external cyclical and variable markets, in terms of both price and demand patterns. However, the bulk of
our costs are fixed and our ability to significantly suspend or reduce these costs is limited.
With the decrease in commodity prices, earnings across the PGM sector are under pressure. This will consequently constrain cash
generation across the sector resulting in prudent management of liquidity becoming even more important.
The following factors have been considered as part of the liquidity management of the group:
' The group's growth strategy is focussed on growing production down the industry cost curve by developing shallow, mechanisable
orebodies. Our programme of optimising existing operations is progressing and remains on track. We have utilised our balance sheet
to grow the business and the project pipeline has been funded through cash generated by our operations, as well as the utilisation
of our banking facilities and the R15.0 billion DMTN Programme.
' The staggered maturity profile of Northam's DMTN Programme provides an additional degree of certainty and flexibility to prudent
cash flow management. Northam has proactively managed its DMTN Programme's maturity profile to appropriately match the
production growth build-up, and therefore the cash generation capacity of the group. Furthermore, the maturity profile has been
staggered over a number of years to enhance and protect our liquidity position.
' The group's available banking facilities amount to R11.0 billion, comprising a R10.0 billion revolving credit facility and a R1.0 billion
general banking facility. These facilities remain undrawn.
' As at 31 December 2023, net debt improved to R2.4 billion, with cash and cash equivalents of R11.8 billion and the rolling 12-month
net debt to EBITDA ratio at 0.24.
' Through the acceptance of the Implats Mandatory Offer, Northam received R9.0 billion in cash and 30 065 866 Implats Shares, which
were sold on market for approximately R3.1 billion. The Implats Mandatory Offer presented a well-timed opportunity in the prevailing
PGM market for Northam to secure a significant cash injection that materially strengthened Northam's balance sheet and liquidity
position.
The global economic outlook remains uncertain, resulting in volatile metal prices and exchange rates. Prevailing PGM market conditions
and the material decline in the 4E basket price have negatively impacted the profitability and rate of cash generation of the group. The
group's financial performance is influenced by the exchange rate and commodity prices together with the stability of Northam's broader
operating environment. Relative positioning on the industry cost curve, and the ability to retain operational flexibility and balance sheet
strength, are becoming increasingly important sector differentiating factors. Northam has always maintained inherent optionality and
flexibility in executing its growth strategy and these considerations remain key drivers to all our decisions.
The financial information contained in this announcement is the responsibility of the board of directors of Northam Holdings and has not
been reviewed or reported on by Northam Holdings' auditors, PricewaterhouseCoopers Incorporated. The reviewed results
for Northam Holdings for H1 F2024 are expected to be published on or about Friday, 1 March 2024.
Johannesburg
19 February 2024
Corporate Advisor and Sponsor to Northam Holdings
One Capital
Corporate Advisor and Debt Sponsor to Northam Platinum
One Capital
Date: 19-02-2024 07:05:00
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